That's because of the API version you have configured in the payment method settings which is not correct apparently.
Please check with the merchant support of PayPal for what you need to enter there. By default it's 109.0

The display of the login form is only because the menu item with the id 101 is used but that menu item's access is not public. It's not linked to your payment method or that setting.

Normally, you just leave the default value, which is 109.0.
And if that doesn't work, then you need to contact the PayPal merchant support to get the answer as it's normally not available in your PayPal control panel.

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